I received the following statement from Steven Goodrich, CEO and president of PowerPay, Psystar's former credit card processor:
Psystar applied to PowerPay for a merchant account, which is vernacular for an account that allows businesses to accept credit cards for products/services. It might not be apparent from that description, but a merchant account is in some respects a credit facility or line of credit mechanism whereby PowerPay electronically credits funds to a merchant (Psystar in this case), often on a daily basis, based on the merchant's submission of credit card transaction data (charges) to PowerPay.
If a merchant fails to deliver product, or the product is not the type, quantity, or quality that the consumer expects, then PowerPay is often on the hook for any disputed transactions. As a result, there is certain risk in issuing a merchant account, and as such, our application for services is not unlike a loan application. The application and merchant agreement also clearly state that we are relying on the validity of the applicant's submitted information in providing services and any unauthorized variation thereto may result in account suspension or termination.
In its application to PowerPay, Psystar stated it expected to process a specific amount of credit card transactions per month, and that the product or service being sold was 'consulting for information and communication solutions".
PowerPay initially suspended and subsequently terminated the merchant processing account of Psystar for three primary reasons;
- product/services not as represented in application
- sales volumes grossly exceeded
- no address verification utilized
PowerPay considers a number of factors in approving any merchant account. Credit history, bank balances, product type, method of sales, etc. Based on information submitted by the applicant, PowerPay approved the merchant account for modest transaction volumes and for specific products/services.
In this case, the applicant processed almost 200% of his anticipated annual volume over just a few days. In doing so, the applicant never used AVS (address verification services) which is a vital part of validating cardholder consent. This, coupled with the fact that product was substantially different from what was described in the application left PowerPay no choice but to suspend services. The discrepancy in addresses and other info only add to our discomfort with the account.
PowerPay handles literally billions of dollars of processing volume annually. The notion that PowerPay 'dropped the ball' or was 'unable to handle a flood of orders' is inaccurate. PowerPay welcomes large volume e-commerce and other merchants and has an exceptional track record and reputation in serving this space.
In all likelihood, the application would have been declined and never activated had the applicant accurately reflected transaction volumes and product types in its application to PowerPay.
Feel free to contact me directly for more info if needed.
Stephen Goodrich President & CEO